On Wednesday, President Trump hit the markets with new tariffs—50% on copper and 30% on imports from Brazil and Sri Lanka—raising concerns that he might disrupt the global economy. This added pressure on central bankers, who are already struggling with inflation and fears of slow growth caused by tariff issues. However, White House officials hinted that these tariffs could be reduced if trade deals are reached.
In the U.S., FOMC meeting minutes showed that policymakers are split on what action to take next. While a rate cut is more likely, some feared an inflation spike and preferred no cuts at all. Trump has been pushing for a 3% rate cut and even suggested replacing Fed Chair Jerome Powell, adding to the pressure.
Meanwhile, trade tensions continue to rise between the U.S. and both the EU and Japan. The U.S. proposed a revised trade deal with the EU, but the bloc's car trade demands have caused a standstill. Concerns are also growing that Trump’s 25% tariff on Japan could slow the country’s economic growth by 1.1%.
Elsewhere, China pledged new support for employment, while the UK and France agreed on using nuclear deterrence if needed. Israel’s military intercepted a missile fired from Yemen, with no injuries reported.
Despite a busy day, markets showed little major progress. Stocks rose, the U.S. Dollar weakened, and Gold recovered. Oil remained steady, while currencies like EURUSD struggled and GBPUSD gained. USDJPY reversed from a three-week high but lacked strong downward momentum. Cryptocurrencies and bond yields were mixed, with Japanese bonds rising and U.S. and German yields pulling back.
Fears about a major hit to Japan’s economy grew as talks with the U.S. stalled. The White House is firm on its demands, while Japan resists auto tariffs, leading to a trade deal deadlock. Both sides are still trying to reach an agreement before the August 1 deadline. Meanwhile, weak Japanese data on producer prices (PPI) and real wage growth have challenged the Bank of Japan’s plans for a rate hike, causing Japanese yields to rise. Despite this, the Yen’s status as a safe-haven currency and its policy divergence from the rest of the world are putting pressure on USDJPY, especially as the U.S. Dollar pulls back.
Both EURUSD and GBPUSD managed to hold steady on Thursday, but neither showed strong bullish momentum. The ongoing uncertainty over EU-US trade deals, along with concerns about the UK’s fiscal health and political instability, continues to weigh on both currencies.
In the Eurozone, political tensions and cautious comments from European Central Bank (ECB) officials are keeping the EURUSD from making significant gains. Similarly, for the GBPUSD, doubts about the UK’s economic strength and ongoing political drama are creating roadblocks for any meaningful recovery.
Overall, both pairs face challenges as macroeconomic concerns persist, making a sustained rally unlikely in the near term.
AUDUSD and NZDUSD are seeing mild gains, supported by the US Dollar’s pullback, progress in US-China trade talks, and new stimulus announcements from China.
However, USDCAD is trading mixed, despite the weaker US Dollar and stronger oil prices—Canada's key export. The lack of updates on the US-Canada trade deal is dampening optimism for a breakthrough, while the previously hawkish outlook on the Bank of Canada (BoC) is fading ahead of Friday's Canadian employment report.
Gold has bounced off a six-month support line, supported by a weaker US Dollar, rising market uncertainty, and increasing demand for Gold ETFs. Despite reversing previous losses, gold is struggling to gain strong momentum, as US Dollar bears remain unconvinced, and global efforts to dethrone the Greenback as the world’s reserve currency seem to be failing.
Meanwhile, Crude Oil is shrugging off a second consecutive week of unexpected inventory increases and OPEC+ plans to boost production. Some OPEC members are quietly avoiding these output increases. Geopolitical tensions in the Middle East and growing optimism over China’s economic recovery are helping oil rebound for the fourth straight day.
Bitcoin (BTCUSD) reached a new record high before pulling back slightly, while Ethereum (ETHUSD) posted a three-day winning streak. Technical breakouts and expectations of more institutional buying ahead of "Crypto Week" (starting July 14) are fueling optimism. Additionally, the US SEC’s recent support for ETF applicants is boosting crypto sentiment, even as the US Dollar struggles and broader market dynamics remain subdued.
Even if the German inflation, US Jobless Claims, and speeches from the mid-tier ECB and Fed officials will decorate Thursday’s economic calendar, major attention will be on the US tariff announcements & geopolitical news. Should Trump announce heavy tariffs and stick to it, the US Dollar could witness further downside, and the same might help Gold, Yen (JPY), and Swiss Franc (CHF) to remain firmer. However, any positive outcomes and upbeat US data might help the US Dollar to end the week on a positive note after a two-week downtrend. That said, the USDJPY and Gold will be in the spotlight amid the US-Japan trade deal deadlock and globally increasing gold buying despite mixed technical details.
May the trading luck be with you!
